With current interest rates as low as they are, many people are finding now to be a very good time to refinance. But just because you want to do so doesn’t mean you’ll automatically be able to.
There are certain factors that make it difficult to get approved for a refinance, but luckily, there are ways to correct them. If you are considering refinancing and fall into one of these four categories, take the necessary steps today to secure that new loan tomorrow. And speak to a mortgage broker for help along the way.
1) The Jumbo Loan
If your mortgage loan is too big, you could have a hard time getting a lower rate, or a refinance altogether. It gets even harder if your credit isn’t stellar. There’s hope for you though: if possible, approach the refinancing with money, making it a cash-in refinance, which lowers the size of the mortgage. This makes for a better loan-to-value ratio (LTV), which will help get you approved and lower your rate.
2) Not Enough Income
It happens all too often: your income is lower now than it was when you first got your mortgage. This could spell trouble when it comes to refinancing. While the preferable solution, of course, is to make more money, that’s easier said than done. The alternative: try to lower your debt as much as possible, which will help your debt-to-income ratio. Also consider a co-borrower, if at all possible.
3) Not Enough Equity
Home equity is a big factor when it comes to refinancing, and it happens often, especially with borrowers who originally took out interest-only mortgages or took cash out of their loan. This brings up the loan-to-value ratio, which makes all the difference when refinancing. Talk to your mortgage broker about specific loans, many of which are government-backed, that are suited for those with higher LTVs.
4) Not Enough Assets
Yes, there’s a theme here; not enough of many things makes lenders very wary. Assets is one of them. They want to see money in the bank during a refinance, just as they did when you originally got your mortgage. Specifically, they want to see it in the form of savings, retirement funds, stocks, etc. While winning the lottery probably isn’t going to happen, anything you can do to get those numbers higher, including asking for loans from family, will help. Just be sure to do it several months before applying.
If you’re buying or selling a home in the Boston area and are in need of a mortgage or refinance, or have any mortgage-related questions, contact me at any time for advice or help.